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U.S.-listed shares of Turkcell (TKC) dropped almost 2% despite Goldman Sachs upgrading the Turkish telecom giant to a Buy from a Neutral.

Last week, Turkey’s biggest mobile-phone operator reported fourth-quarter net profit that fell by half, missing expectations. Turkcell Iletisim Hizmetleri (as the company is officially known as) blamed to foreign-currency losses from operations in Ukraine and Belarus.

As Turkey’s dominant telecom provider, Turkcell, has long had a complicated ownership structure that increasingly is dominated by the Turkish government. Earlier this month, Citi Research argued that the valuation looked high relative to other emerging market wireless providers, but kept the stock at Neutral.

But over the last few months, the stock has been hit by a strong of downgrades. Renaissance Capital cut Turkcell to Sell from Hold in January. Deutsche Bank cut the stock to Hold from Buy in December and Bank of America cut the stock to Neutral from Buy in November.

Laborers carry groceries in Kolkata. India’s inflation dropped to a new multi-year low in October.

Among Goldman Sachs’ top 10 themes for 2015: expect disinflation and improving trade imbalances among emerging markets, with commodities production setting apart the winners and losers.

But the Goldman Sachs Global Investment Research team concludes that in what looks to be a low-return world, equity yields look better especially in the emerging markets. Lower oil prices will boost returns for some countries, allowing monetary easing. They write:

” … It is hard to argue for broad-based EM equity outperformance without a more convincing improvement in the China growth outlook. …[But] it is striking that EM equities now trade with earnings yields that are above their long-run averages. That on its own is no reason to own them. But for the first time in a while, we find ourselves thinking that they offer at least the possibility of significantly higher returns than in DM over the medium term, even if they still offer significantly more risk.”

Goldman writes that emerging markets saw the worst growth in the second half of 2014 since the global financial crisis, given the end of the Federal Reserve’s asset purchase program, the threat of rising interest rates, and slow demand from China. But emerging markets will greet the new year 2015 in better health than they have in recent years, with external balances improving especially in standouts India, Thailand and Chile. Meanwhile lower food and oil prices are helping lower inflation across the board. From a 23-page report out today:

“The relief from this source is likely to allow EM local currency bonds to perform well – supporting front ends in Turkey, where inflation is likely to decelerate sharply; intermediate maturity bonds in Israel, Hungary and Romania, where ‘lowflation’ will likely persist for longer; and 5-10 year bonds in India, where lower inflation is also likely to further entrench the credibility of the new inflation target and create additional fiscal space in the medium term. But 2015 will also see more polarisation between countries that have addressed their macroeconomic imbalances, and are on the right side of the oil import/export divide, and those that have not. India is the clearest example of the former, and we expect to see Indian assets (equities, INR, in addition to rates) trade well through the year, and Turkish equities and the TRY should benefit from falling oil prices even though the external adjustment is not complete there. South Africa and Brazil are in the opposite camp: external imbalances are still very wide, the falls in commodity prices are hurting their terms of trade, and significant further currency weakening is likely in both cases. In Colombia, with significant oil exports, a slowing business cycle and a wide current account deficit, the currency is likely to bear the brunt of the adjustment and rates may fall further. Finally, we may more see severe credit issues in 2015 in Venezuela, Ukraine, Argentina and even Russia, especially if commodity prices fall significantly further.”

Goldman adds that while it expects modest stabilization in inflation, it below targets in some corners, and there is a “meaningful risk that a more acute deflationary mindset takes hold instead.” With the European Central Bank moving toward credit easing, “a number of the “developed markets of emerging markets” – Israel, Korea, Poland, the Czech Republic and even Hungary — may consider quantitative easing “or at least welcome further currency depreciation as part of their own efforts to prevent inflation from falling further.”

Goldman doesn’t suggest specific stocks to play its themes. There are many funds that could be used in a diversified portfolio: they include the iShares Emerging Markets High Yield Bond ETF (EMHY), the Wisdom Tree Emerging Markets Equity Income ETF (DEM) and the iShares MSCI Emerging Markets Eastern Europe ETF (ESR). Among broader emerging market equity funds, the largest include the iShares MSCI Emerging Markets ETF (EEM) and the Vanguard FTSE Emerging Markets ETF (VWO).

Brazil President Dilma Rousseff and former president Luiz Inacio Lula da Silva celebrate her victory.

Goldman Sachs downgraded Petrobras to Neutral from Buy Wednesday and removed the stock from its Latin America Spotlight List.

U.S.-traded shares of Petroleo Brasileiro (PBR) are down 1.3% to a recent $11.53. The iShares MSCI Brazil Capped ETF (EWZ) is up 1.6% this morning, while the iShares MSCI Emerging Markets ETF (EEM) is up a point.

The stock has tumbled 30% in the past three months, versus a 9% decline for Brazil’s Bovespa Index. Petrobras shares have tumbled 16% this year, versus a 1% rise in the Bovespa. Headed into Brazil’s Sunday election, in which leftist Dilma Rousseff returned to the presidency, short seller Jim Chanos was skeptical on Petrobras’ business model; he pointed to the considerable borrowing Petrobras needs to pay dividends and fund its high-priced offshore exploration budget.

“Despite PBR’s inexpensive asset value, expected 12-18 months production growth, and benefits from lower oil prices, we believe the stock remains dependent on domestic fuel pricing policy and currency movements, which remain unpredictable, making it difficult to set a bear or a bull case, with the risk-reward being symmetrical at current levels.”

Goldman thinks fears that Petrobras could do an equity offering in 2015 are “overstated under a potential currency weakening scenario.” But at the same time, Petrobras has tough choices ahead to maintain cash flows:

“Choosing among increasing domestic prices (with implications for inflation), cutting downstream capex, or accessing debt markets / structured finance solutions at higher costs. In our opinion, news flow on these fronts could keep the stock’s volatility high, given cash flow can change dramatically under these different assumptions. That said, we still see Petrobras performing well operationally, with production picking up, and efficiencies and cost control improving.”

Goldman reduced its 12-month target price on local shares: to R$18.00 from R$23.0/share (PN) and to R$17.1/share from R$22.2/share (ON) and part of the calculation is an assumed exchange rate 2.5 reais to the U.S. dollar from 2015 onwards (vs. R$2.4/US$ previously) and 7.5% annual increases in domestic fuel prices in each of the next two years.

Petrobras is trading at an average 2015-16 estimated price/earnings ratio of 6.3 times, a higher multiple than the 5.8 times for Argentina’s YPF (YPF), Goldman estimates.

While Thailand might keep climbing, the Philippines could be set to disappoint, says Timothy Moe, chief equity strategist for the Asia-Pacific region for Goldman Sachs.

First the Philippines: Moe “loves the story but not the valuation.” The Philippines have transformed its economy and there’s a good case for it continuing to grow at a strong clip. But its stock market is trading at 20 times earnings and it’s unlikely that its companies will produce the earnings surprises that would make that 20x look more like 13x. “Don’t overpay for growth,” Moe says. “You have to pick your entry point.”

Thailand might be overbought in the short-term, but its economy is growing at a 20% clip and its stocks trade at 13 times earnings, Moe says. It also has a level of political stability that was unthinkable a couple years ago. And its economy could get a further boost if some “mega-projects” that have been in the works get approved–and that could improve efficiency in the economy as well.

Goldman Sachs and ALPS have teamed up to launch three new ETFs, one of which targets emerging markets as an asset class–though this being Goldman Sachs, the term emerging markets is never used.The three ETFs are:

Each of the new ETFs uses a mix of other ETFs to provide exposure to the markets with the most price momentum (as defined by the best six-month historical returns) while also limiting the overall volatility of the portfolio by adding U.S. Treasurys. Every day, the funds’ fact sheet says:

• The 3 month realized volatility of the current index portfolio is computed

• If that volatility exceeds a volatility cap (e.g.: 10%), the index portfolio is partially reallocated into a cash position to achieve the targeted volatility

• If the portfolio volatility then drops, the index portfolio is reallocated back into the initial portfolio

As of Dec.3, the Growth Markets (Goldman’s term for emerging markets) ETF had 30% of its portfolio in the iShares MSCI Mexico Investable Market Index ETF (EWW), 30% in the iShares FTSE China 25 Index ETF (FXI), 30% in the iShares MSCI Turkey Investable Market Index ETF (TUR), and 10% in the iShares MSCI South Korea Index ETF (EWY). It limits itself to those countries plus India, Russia, Indonesia and Brazil.

The Asia ex-Japan ETF targets emerging Asia, with Australia thrown into the mix. As of Dec. 3, the portfolio had 30% each in Australia, Hong Kong and Thailand, and 10% in Singapore.

Both ETFs will target volatility of 20%, with a cap of 22%, and with volatility so low, neither has a stake in Treasurys.

While ETFs are typically thought of as a low-cost product, these ETFs might as well be mutual funds. The ALPS|GS Momentum Builder Growth Markets Equities and U.S. Treasuries Index ETF charges 1.29%, while the ALPS|GS Momentum Builder Asia ex-Japan Equities and U.S. Treasuries Index ETF charges an annual fee of 1.22%.

About Emerging Markets Daily

Emerging markets have been synonymous with growth, but the outlook for individual nations is constantly changing. Countries from Brazil and Russia to Turkey face challenges including infrastructure bottlenecks, credit issues and political shifts. Barrons.com’s Emerging Markets Daily blog analyzes news, data and research out of emerging markets beyond Asia to help readers navigate the investment landscape.

Barron’s veteran Dimitra DeFotis has been blogging about emerging market investing since traveling to India and Turkey. Based in New York, she previously wrote for Barron’s about U.S. equity investing, including cover stories and roundtables on energy themes. Dimitra was among the first digital journalists at the Chicago Tribune and started her career as a police reporter at the Daily Herald in the Chicago suburbs. Dimitra holds degrees from the University of Illinois and Columbia University, where she was a Knight-Bagehot Fellow in the business and journalism schools. She studies multiple languages and photography.